DEBT DILEMMA
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| Have attitudes to debt changed? |
Debt is something that most of us
worry about at some point in our lives. But are attitudes to being
in the red changing? And how can you
avoid the debt trap?
At one time, debt was almost a sin, seen as completely
taboo, and something to be ashamed of.
If you found yourself in debt, you certainly didn't tell
anyone.
Today, attitudes to debt are changing, largely due to
the credit card revolution and the ease of getting loans.
These days most people live with a certain amount of
debt in their lives, whether it's a loan or instant credit.
Inside Out investigates how attitudes to debt vary, and
examines how to avoid the debt trap.
The debt mountain
UK consumers are in the grip of a credit craze if current
statistics are to be believed.
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| Spend, spend, spend - consumers are using credit more and more |
Borrowing is on the increase with consumer credit in
the UK up 65% since 1997, according to Euromonitor - an organisation that
provides global business intelligence and market analysis.
The proportion of credit card borrowing nationwide increased from 21%
in 1997 to 30% in 2001.
In early 2004 debt counsellors reported a 25% surge in
the number of calls received compared with the same period in 2003.
In the West of England it's a similar picture, with
more and more of the region's population accumulating debt.
Student debt
Lee and Ellie are students at the University of West
of England.
Lee has just started the second term of his foundation
year, and Ellie is in her second year.
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| Lee and Ellie
will have a mountain of debt by the end of University life |
They are looking at £20,000-£40,000 of debt
by the time they have finished their courses.
As students, a lot of their outgoings are spent on essential,
every day life.
They don't live extravagantly - their money seems to
just go on buses, launderettes, coffee and meals.
They do smoke, and they do like to go out, but they are
still constantly struggling to make ends meet.
Then there's the controversial matter of student loans,
which could hang over them for years after they've finished their studies.
Money worries stress them out about as much as their
college exams and coursework. It's a distraction that they can do without.
Instant credit
Ollie is 24 years old, and his problem is very different
- he's run up his substantial debts on his credit cards.
Ollie moved out of home, and set up his own business.
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| If
debts mount too high, no service will be available |
He lived the lifestyle he wanted on credit, and the money
went on clothes, food and drinks for friends, and music.
He didn't buy a car or anything major, but he still managed
to run up a debt of £3000.
The extent of his debt isn't as huge as that of Lee and
Ellie, but it's something that many of us can identify with.
Ollie's story is a cautionary tale. He explains how his
money disappeared over a period of time, almost without him noticing.
"It went on drinking, holidays, clothes, presents
for my girlfriend, taking mates out for meals... anything where you could
spend money on a credit card.
"But if you don’t think about it, if
you don’t concentrate on it, it's quite easy to let it boil in the
background and get on with your life.
"I treated the credit card as money for blowing
on nice things, it wasn’t money to live off, it was money to get
the lifestyle that I wanted."
Unexpected costs
Ollie's situation was made worse when he was hit by a
few unexpected problems. One of his credit card companies upped his limit
without telling him, and he spent a lot of money on the internet.
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| Ollie
funded his lifestyle through the credit card |
Ollie is a good example of falling prey to all of the
things that are so widely available to us all.
His dad Andi lives in Tintern. He bailed his son out
because, for him, debt is absolutely wrong.
Ollie was never really that worried about it, which highlights
the differing opinion between generations.
He's obviously relieved to be paying it back without
interest to his dad rather than being at the mercy of a credit company!
Credit control
So what can you do to reduce the risk of finding yourself
in major debt?
| Top Tips On Debt |
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General advice
* Keep track of your outgoings
and always check your bank statement.
* Budget for irregular bills and expenses.
* Educate yourself about money management.
* Set limits - cut your cloth to fit your incoming finances.
* If money matters
are spiralling out of control, buy everything on a cash basis.
* Seek help early on if debts escalate.
Students
* Part time and holiday work can be a good way of generating extra
income.
* Choose a bank account with cheap
overdraft facilities.
* Some universities run hardship funds for poorer students.
* Many colleges offer debt advisory services.
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A lot of people get into debt because of circumstances
beyond their control.
Keeping a budget
allows you to get an accurate picture of your financial position - your
incomings and outgoings.
It will show how your money is being spent, and allows
you to set spending priorities, and highlight
where savings can be made.
Another good way to keep on top of your finances is to
evaluate your standard of living.
If you're spending too much on clothes, household goods,
holidays or the Internet, you need to cut back.
Think ahead and try to anticipate any spending peaks.
Don't take on major loans if you can't really afford to pay them back,
rather than exposing yourself to enormous risks.
Get out of the habit of spending to the limit, and cut
back on non-essential luxury items if you're feeling the financial pinch.
Hey big spender!
Careful budgeting can help to make your money go further.
A realistic budget ensures that
your basic needs are met, and it allows steps to be taken to get you out
of debt.
It can also be a very effective brake on large impulse spending.
In addition many debt advisory groups suggest developing
some form of "cushion" to help cope with a downturn or change
in circumstances.
It's also important to have a financial plan with goals
for the future so you can take a longer term view of your finances.
This can include savings accounts, a pension, money set
aside for your children, and a business plan (if you're thinking of starting
a business).
Help at hand
If you do get heavily into debt, take action as soon
as possible. Talk to an expert and get professional advice.
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| High-profile campaigns have highlighted access issues |
There are several national and local organisations who
can help with specific problems.
One of these is the National Debtline who run a freephone
help line on 0808 808 4000.
Another good source of advice is the Consumer Credit Counselling Service
on 0800 138 1111.
The BBC is currently running a campaign called Hey Big Spender
which aims to increase awareness of the issues around debt.
Visit the
special Hey Big Spender web
site for more information.
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